14 June 2018

Severe penalties for underpayment of wages

The Federal Circuit Court of Australia has imposed significant penalties on employers that have underpaid their employees.

Key impacts

  • The decision shows that the Court can impose a penalty on both a company and director of the company where the employer company has underpaid its employees.
  • Employers should ensure that they are paying their employees at or above the minimum wage in accordance with the applicable modern award, relevant industrial instrument or national minimum wage.

Facts

Viplus Pty Ltd and Vipper Pty Ltd each conducted a 7-Eleven Store franchise in the Brisbane central business district. Jason Yuan was a director of each company and managed both companies and their 7-Eleven stores. The employees were covered by the General Retail Industry Award 2010 (Award). In a previous decision on liability, Viplus, Vipper and Yuan were found to have contravened s 45 Fair Work Act 2009 (Cth) by underpaying their employees. The Court then had to consider how to determine the appropriate penalty, in particular whether the multiple contraventions should be grouped and treated as a single contravention when they arose out of a single course of conduct.

Outcome

The Court found that it was appropriate to group the contraventions based on the separate and distinct entitlements or obligations the employers owed to employees under the Award. These included the employers’ failure to pay casual loading, overtime, evening penalty, Saturday loading, public holiday rates, and shift penalties. Ultimately, the penalties imposed on Viplus, Vipper and Yuan were $88,140, $68,262 and $36,559 respectively.

The Court looked at the nature and extent of the conduct which led to the breaches and circumstances that took place and noted that Vipper and Yuan had previously been involved in a complaint of underpayment by a former employee. In that instance, Vipper and Yuan were issued with a letter of caution by the Fair Work Ombudsman. The Court also considered the underpayments to be substantial, as the 21 employees affected were underpaid $31,507.27 altogether. The Court further observed that there was no evidence regarding the size or financial circumstances of either Vipper or Viplus, which would warrant a reduction in any penalty to be imposed. The Court found that Vipper and Yuan knew or ought reasonably to have known that they were non-compliant with the Award, from the previous complaint and the extensive material provided by 7-Eleven to its franchisees regarding payment obligations and compliance with workplace laws. Although the employers cooperated with the investigations, the Court found the penalty should be imposed at a level that would likely deter similar contraventions by similar individuals or organisations.

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